The NHS funding gap

Britain’s National Health Service always seems to be in crisis and running out of cash. Is it really, and what can be done? Alex Rankine reports.

How much does the NHS cost?

The Department of Health plans to spend £123.7bn on health in England in 2017/2018 – roughly £2,200 per head and 18% of total state spending. £13.2bn of that will be spent in Scotland, £7.3bn in Wales and £5bn in Northern Ireland (see below) and the total will rise to £133.1bn (£126.5bn adjusted for inflation) by 2020/21. Much of the money – around £50bn – goes in staffing costs (the NHS employs more than 1.3 million people and is the world’s fifth-biggest employer).

The drug bill accounts for another £16.8bn, with about £2bn of that spent on just ten “blockbuster” drugs used for conditions such as arthritis and breast cancer. Altogether about £108bn of the £123.7bn budget in England will be spent on the day-to-day running of the NHS, with the rest used for public health initiatives and infrastructure.

Who’s in charge of the spending?

In 2013 the coalition government subjected the NHS to the biggest reorganisation since its creation with a view to making it more effective. Primary care trusts were scrapped, with more than 200 GP-led clinical commissioning groups (CCGs) taking over responsibility for buying most care locally. These now control 60% of the NHS budget. In England most of the rest is managed by NHS England, which ensures that CCGs do not overspend and that national NHS policies are followed. Simon Stevens, the current chief executive of NHS England, is said to be the fourth-most powerful person in England after the PM, the chancellor and the governor of the Bank of England. And in terms of the people and cash he is directly responsible for, he is.

Has the reorganisation been successful?

The enhanced role given to GPs might have started to make the NHS feel more flexible. A study in 2015 found that clinical leaders were “more willing to challenge or ignore diktats and messages from above” than traditional health managers, for example. However the King’s Fund, a non-partisan health think tank, argues that the “top-down reorganisation” has been “damaging and distracting” to patients and staff alike. And anyone who hoped it might lead to cost efficiencies will have been disappointed.

The one thing everyone knows about the NHS is that it never will have enough money. The restructuring hasn’t changed that. In 2013 NHS England estimated that it needed £30bn of additional funding by the end of the decade to provide the same levels of care as it does now, thanks in part to the needs of our aging population (between 2005 and 2016 the number of people aged over 85 in England increased by 31%). It still does. Current state spending plans suggest it is only going to get £8bn.

How is the government trying to fix this never-ending problem?

Not with creative thinking. So deeply embedded in the UK’s political and public mind is the idea that the UK system of providing “free” healthcare to all at the point of delivery has made us the “envy of the world” that it is impossible for major change to occur. So while two-thirds of hospital trusts are thought to be in the red and care is being compromised as a result (NHS England has “significantly relaxed” its 18-week waiting time target for non-urgent operations), all politicians can do is to promise cost efficiencies and/or slugs of new money inside the current system. So the 2015 Conservative manifesto called for an unlikely £22bn-odd of savings and the 2017 Tory manifesto promised to shovel in enough extra money to cut the funding gap to a mere £12bn.

But isn’t the UK system the envy of the world?

The UK system has huge plus points. On some measures it offers value (we spend 9.1% of GDP on healthcare compared to 11.5% in France) and on others it is efficient: a 2014 study by the US-based Commonwealth Fund gave the NHS exceptional scores on access, efficiency and quality. On others it is not. The latter also noted that the NHS is not perfect: the most serious black mark against it being, as one paper put it, its “poor record on keeping people alive”.

If we could replicate the survival rates from common cancers in the Netherlands, for example, we would save 10,000 lives a year. This may be, says Mark Littlewood of the IEA think tank, one reason why other countries aren’t in any rush to replicate the NHS.

So what can be done?

Almost all developed countries offer high quality universal healthcare via some kind of insurance or subsidy scheme (even in the US some 55 million people are on the state-sponsored Medicare system) and a mix of private and public hospitals. Some make small charges to see a GP. Some use a mix of state and private hospitals. Some have no state hospitals. But nearly all use some kind of competition to encourage innovation and efficiency.

If our primary aim is to maintain a state-sponsored medical monopoly for ideological reasons, we don’t need to study elements of these systems. If, as Littlewood says, our primary aim is too keep as many people as possible alive, perhaps we do.

A devolved crisis

Although healthcare is a devolved matter, many of the challenges faced by the English NHS can be seen in other parts of the UK. A&E waiting times have been increasing in recent years in England, Wales and Northern Ireland, with the Welsh government forced to deny accusations of a “crisis” in Welsh emergency care last winter. Scotland, where health spending per head is higher than in England and Wales, has performed better on many performance measures in recent years, although the Scottish BMA recently warned that the NHS funding gap is “just as real in Scotland” as it is in the rest of the UK.